Lennon and more than 500 other investors teamed up to sue the company behind the schemes, Innovator One. Stiedl was the driving force behind the firm.

But they all lost out after the Inland Revenue said the schemes were against tax rules.

The highly complex investment plans were designed to exploit tax breaks for investors who put their money into software and technology.

The incentives were brought in after the dotcom crash hit technology shares on global stock markets in 2000.

Lennon put a total of £200,000 into two schemes – one called Mamjam Technology Platform Partnership and another called Casedirector Technology Partnership.

Investors put in a little more than £6million.

The schemes then took out another £19million in bank loans and used the cash to buy software from another company.

The idea was that Lennon would be able to count £800,000 of the borrowed money as part of his investment, giving him a total of £1million and allowing him to reduce his income tax bill by £400,000.

But the company who sold the software to the schemes then put the borrowed money on deposit with the bank, meaning it had effectively gone round in a circle.

And the taxman ruled that, because of that, the investors could only claim tax breaks on the money they had put in themselves.

That meant Lennon would only have got back up to £80,000.

And since the investment scheme failed, the rest of his stake was wiped out, saddling him with a £120,000 loss.

Hartson invested £120,000 in the same two schemes as his former teammate. He joined Lennon and the other investors in the lawsuit against Innovator One.

They claimed at the High Court in London that the schemes were fraudulent and had been badly put together.

In all, they alleged, their investments had been mis-sold for more than a dozen different reasons.

But judge Mr Justice Hamblen rejected their case.

He ruled: “Although the claimants were understandably aggrieved to lose their cash contributions and receive back only limited tax relief, there are obvious risks in going into aggressive tax schemes which offer the prospect of almost immediately doubling your money.”

Collyer Bristow were one of the defendants in the lawsuit after acting as lawyers for Innovator One, and are now preparing to try to claim back their costs from the investors.

A costs hearing is expected later in the year. No date has been set.

If the bill does reach £20million, it will leave the 555 investors facing costs of £36,000 each. Lennon and Hartson declined to comment.

The Innovator One schemes were similar to more recent schemes involving film financing which have also proved popular among footballers because of promises to massively lower their income tax bills. But the film schemes have often proved similarly unsuccessful, with the taxman refusing to hand over rebates.

Collyer Bristow advised Whyte on his takeover of Rangers and handled the money paid by Ticketus in exchange for the rights to future Ibrox season ticket sales.

Whyte’s lawyer at Collyer Bristow, Gary Withey, briefly served as Rangers company secretary. But he claimed he had no involvement in the day-to-day running of the club and knew nothing about the decision by Whyte not to pay income tax and VAT.

He quit Collyer Bristow in March, claiming he and his family had been threatened because of his Rangers involvement.

Rangers’ administrators, Duff & Phelps, sued Collyer Bristow and Rangers FC Group – the company Whyte used as a vehicle for his takeover – for £25million in April.

They claimed Whyte and Withey conspired to buy Rangers when they knew they didn’t have the money to do so, and the club’s board shelved plans for a £25million share issue as a result.

A full hearing in the case has been set for October.

Collyer Bristow and Withey deny wrongdoing and the law firm have vowed to strongly contest the claims, which they have described as “highly speculative”.